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MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent, while Japan's Nikkei dropped 0.5.
Global bond sell-off triggers the biggest decline in US equities in nearly four months. As 10-year treasury yields surge to the highest level since 2011, fears that current rates could restrain growth has hit stocks across the US, Europe and Asia.
FTSE 100 posting its biggest drop since August yesterday.
The Dow Jones drops more than 250 points as treasury yield rates surge, while the S&P 500 lost 0.82 percent and the Nasdaq Composite dropped 1.81 percent.
In EM the Indian rupee has strengthened going into the RBI interest rate decision.
After significant devaluation of the Turkish lira recently, it looks like the re-balancing of its economy is under way as the trade ministry report an increase in exports. This has been faster and stronger than expected.
US non-farm payroll release today. US Labour department forecasts an increase of 185,000 in non-farm payrolls last month and the unemployment rate is expected to fall by 0.1% to 3.8% - an 18 year low.
Asian overnight: Once again it is the Australian ASX 200 which provides the one outlier to a wider bearish story within Asia, where China remains the notable absence for the duration of the week. Data-wise, the Australian economy received a boost in the form of a stronger retail sales number, coming in at 0.3% as expected. Emerging market currencies have been under pressure this week, and the Indian Rupee is in focus today, the RBI expected to raise rates later in the morning.
UK, US and Europe: The US Treasury yield is making headlines and often seen as a ‘safe haven’ or risk free investment over periods of potential uncertainty. A rising curve is generally seen as negative across other asset types. Wall Street also took a hit as FANG stock drew blood as investors and speculators begin to price in a potential acceleration in inflation.
Continued positives in jobless claims and factory orders out yesterday all painted a good picture for the US economy, nicely lining up the non farm payrolls figure due at 1.30pm BST. As always any USD cross will likely experience significant volatility around this time, along with most assets quoted in USD. Bond markets, oil, and inelastic soft commodities may also see fallout.
A relatively quiet European session today sees very little in the way of major market moving events, where the German factory orders has already been released before the bell (up to 2% vs 0.7% expected). Following yesterday’s relative lull in data, today sees all eyes turn towards the US once more, with the jobs report due out alongside the Canadian version. The rise in yields off the back of strong US data on Wednesday is likely to come back into play for traders. Those following this trade should keep an eye on the jobs numbers, as a similar outperformance is expected to bring another surge. Meanwhile, coming off the back of the US-Canada trade deal, the Canadian dollar could receive another boost with markets expecting an improved employment change and unemployment rate today.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
1.30pm – US non-farm payrolls (September), balance of trade (August): forecast to see 185K jobs created from a reading of 201K a month earlier. The unemployment rate is expected to fall to 3.8% from 3.9%, while average hourly earnings rise 0.2% MoM from 0.4%. Trade deficit to narrow to $50 billion from $50.1 billion. Markets to watch: US indices, USD crosses

1.30pm – Canada employment (September): 11,400 jobs expected from a drop of 51,600 a month earlier. Market to watch: CAD crosses
Corporate News, Upgrades and Downgrades
Lenovo shares drop 20% following report over alleged Chinese spy chips.
Unilever withdraws proposal to simplify dual structure.
Danske Bank confirmed yesterday that the US DoJ is investigating potential money laundering activity and that they’re received a ‘request for information’. Danish regulators have said they want the bank to increase their capital reserves, whilst Danske themselves recently confirmed they’re going to stop a share buy back program. Shares are down nearly 40% from the beginning of the year.
Intu Properties faces a takeover by its largest investor, Peel Group, in a multi-billion pound deal.
Toyota recalling over 2.4 million hybrid vehicles over battery faults.
Centamin has lowered gold production guidance for the year, with output now expected to be around 480,000 ounces, below the 505-515K oz. However, Q3 production was up 27%.
Intertek Upgraded to Buy at Berenberg
Eutelsat Upgraded to Buy at Goldman
Proximus Upgraded to Overweight at JPMorgan
Helvetia Downgraded to Hold at Baader Helvea
Antofagasta Downgraded to Sell at Goldman
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Theresa May declares to end austerity in the much anticipated Conservative party conference yesterday. Bloomberg has also reported this morning that the prime minister plans to rush her Brexit deal through parliament in a bid to stop the opposition voting down the treaty.
The DOW hits record highs of 26,951.81 but stocks close with minimal change on the day as rising interest rates have made investors wary.
The tension between the U.S. and China continues as China plans to sell $3bn worth of dollar bonds.
In EM the Brazilian stock market is having it's strongest rally over the past two years, up more than 3%, as far-right candidate Jair Bolsonaro has extended his lead in the Brazilian election, according to opinion polls.
European market regulators, ESMA, are drafting a number of bilateral agreements with the FCA in an effort to reduce market instability going into Brexit. A lack of political agreement is the main worry, which the second tier financial regulation helps to mitigate.
The 10-year US treasury rose to a seven year high in response to yesterday’s impressive US data which also drove the likes of the Dow and S&P 500 to record highs.
AUD has fallen steadily against the US dollar, coming in at the lowest since mid-September, initially fueled by the release of weaker than anticipated local building approvals data in Australia.
Asian overnight: Yet another day of losses for Asian markets has seen Japanese and Hong Kong indices trading in the red, with Australia representing the one outlier to that story. China remains on holiday and will do so for the duration of the week. Data-wise, the Australian trade data saw an improvement to the overall balance following a rise in exports (1% from -1%) and flat imports (0%).
UK, US and Europe: Looking ahead, we have precious few notable economic events to look out for, with US unemployment claims, factory orders, and the Canadian Ivey PMI numbers providing the only releases worth watching out for. This leaves markets to ponder ongoing themes, with Brexit (post-Conservative conference), Italian deficit (as coalition aim to produce budget) and the US-China trade war remaining key drivers of uncertainty.
Theresa May has called for party unity over her plan to divorce the UK from the EU or risk having "no Brexit at all". The cry for support comes after Boris Johnson's explosive speech on Tuesday, which the prime minister admits made her "cross". RBS Boss, Ross McEwan, is someone who is hoping that Brexit does not get to the stage of a no-deal, as he warns a bad Brexit could see the UK go into a recession.
The recent rallying of oil prices seems to have come to an end as prices fell from four-year highs. This is the result of rising U.S. oil inventories and multiple sources reporting that Saudi Arabia and Russia struck a private deal in September to raise output without consulting other producers, including OPEC.
South Africa: US Index Futures and Asian equity markets are suggesting a softer start for our local bourse (Jse All Share Index). A stronger than expected US private sector jobs report yesterday, has resulted in a strengthening dollar and higher treasury yields. In turn precious metal prices have come under pressure while the rand has softened against the greenback. Tencent Holdings is trading 2.5% lower in Asia, suggestive of a similar start for major holding company Naspers. BHP Billiton is up 0.9% in Australia, suggestive of a positive start for local diversified resource counters. Today's economic calendar is light in terms of scheduled news events, with perhaps FOMC member Quarles' public address at 3:15pm the most relevant to watch out for.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
1.30pm – US initial jobless claims (w/e 29 September): claims forecast to fall to 206K from 214K. Markets to watch: US indices, USD crosses
3pm – Canada Ivey PMI (September, seasonally adjusted): expected to decline to 61.4 from 61.9. Market to watch: CAD crosses
Corporate News, Upgrades and Downgrades
Ted Baker said that revenue rose 3.5% to £306 million for the first half, but pre-tax profit dropped 3.2% to £24.5 million.
Electrocomponents reported a 10% rise in like-for-like sales for the first half, and half-year adjusted pre-tax profit is expected to be around £100 million, up from £79 million.
Aston Martin shares fell on it's first full day of trading, having opened at £19 the shares fell as low as £17.75 before closing for the day at £18.10.
Another recent company that had an IPO in the UK, the Funding Circle, also saw their stock price dive as much as 24%. With both of the recent high-profile IPO's in the UK failing to live up to initial expectations, it will be interesting to see trader sentiment for upcoming IPO's. The disappointing debuts have put the spotlight on some of the biggest investment banks in the world who were involved in the IPO's, such as BoAML, JPM, Morgan Stanley and Goldman, as analysts suggest the newly-listed companies were not priced correctly.
Barnes and Noble is up 20% as the board has initiated a review process which aims to evaluate strategic alternatives, which includes the sale of the company.
Cannabis stock Tilray has fallen 12% in the extended session after the firm announced plans to offer $400 million in convertible notes to institutional Canadian investors, which can be converted into shares.
Watch out for Constellation, Corona beer owner, who are reporting earnings later today at 15:30 UK time. The company made headlines earlier this year as they poured $4bn into Canopy Growth, Canada's top cannabis producer.
Software companies Horton and Cloudera have announced a merger which saw both shares raise 19% and 18% respectively.
Swisscom Raised to Equal-weight at Morgan Stanley Gecina Rated New Overweight at Barclays Shaftesbury Upgraded to Neutral at Kempen & Co
Swedbank Downgraded to Neutral at JPMorgan
Sunrise Cut to Underweight at Morgan Stanley
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Economic data flow has been relatively light overnight, but activity on financial markets is especially rife. It’s begun with the bond market – not in Europe this time, but in the booming United States. There doesn’t appear to be a discernible flashpoint that’s sparked this, but nevertheless and for whatever reason, bond traders have hit the sell button on US Treasuries. The phenomenon can be witnessed across the curve, with US 2 Year Treasury yields climbing to levels not seen since 2008 at 2.86 per cent, the benchmark US 10 Year Treasury yield hitting levels not seen since 2011 at 3.15 percent, and US 30 Year Treasury Yields clocking-in levels not seen since 2014 at 3.31 per cent. As one can safely assume, the DXY has rallied on the developments, pushing to a 6-week high just shy of 95.80.
It’s growth, not inflation: An explanation for the sudden frenzy in fixed income markets is being foraged for. The concern in these situations is that such a move could indicate strife: something tied back to fears uncontrollable inflation, or a reflection of a higher likelihood of US fiscal deterioration. To the relief of market participants however, the consensus regarding the moves overnight is an optimistic one: traders are buying into the Fed’s “growth, growth, growth” view expounded over the last week, and are as such pricing in the prospect of higher US rates. Although myriad of risks now emerges for other asset classes as a consequence to the (apparently) inexorable rise in yields, the underlying reasons should be cause for a calm and collected cheer.
Wall Street: How the rally in bond yields, provided it continues, manifests in US equity markets will become the centre of concern, one would imagine, in coming days and weeks. US indices faded into the close last night as the Treasury sell-off took hold, with the benchmark S&P500 closing only a fraction higher for the day. Both the Dow Jones and NASDAQ put-in a better performance for the session, posting gains of 0.2 per cent and 0.3 per cent respectively – the former registering new all-time highs in the process – but pulled-away notably from intraday highs at the back end of the trading day. Interest rate sensitive and high growth sectors underscored the day’s volatility, as financial stocks climbed along with information technology and industrial stocks; while real estate and consumer sectors suffered under the assumption higher US rates will weigh on property markets and consumption.
The Fed and the stock-market: An implied maxim of the US Federal Reserve that elegantly describes last night’s trading dynamic (the articulation of which is often attributed to Ex-Fed-Head Alan Greenspan) is that the role of Fed is to “take away the punchbowl when the party is getting started”. It was this abstraction that was philosophically behind this year’s stock market correction in February and caused investors to flee from equity assets. Markets appear more circumspect at the moment, galvanized by a booming US economy, and higher corporate profits buttressed by US President Trump’s stimulatory tax cuts. Consensus is still that the times won’t immediately change for the US stock market, with valuations forecast to tighten as earnings keep improving. Even still, as the US equity bull market charges forward, an anxiety that will hover over markets will be whether the Fed’s determination to “normalize” interest rates will sober investors’ euphoria.
ASX: The lead set by the heavy activity on North American markets overnight has SPI futures indicating a 14-point jump for the ASX200 at market open. Australian shares managed to recover territory yesterday, led by a catch up by materials stocks to the global recovery in commodities prices, coupled with a more general recalibration across the index following Tuesday’s bank led sell-off. The fortunes of the financial sector will be of interest today given the tick-up in global bond yields: the circumstances should lead to a favourable view of future bank profitability, but with the Royal Commission still overhanging the industry, perhaps this will be ignored. The ASX200 closed the day at 6146 yesterday, bouncing off support at 6120: previous support at 6160 may prove formidable resistance here and should be watched closely by technical traders.
Oil rallies, EUR stable: There were a variety of other stories occupying traders last night that are worth touching on briefly. US Crude Inventory data was released, showing a surprise increase in oil stock piles. Despite this, the price of oil maintained its upward momentum, driven by the belief that blips in inventory data won’t change the structural problems caused by low production and undersupply. The other unfolding story that is moving markets is the Italian fiscal battle, currently being waged between bureaucrats in Rome and Brussels. The tensions and fears cooled in the last 24 hours, following news that the Italian government had agreed to reduce its budget deficit to 2.0 per cent by 2021. The risks here are ongoing, but for the time being the EUR has settled as the spread between Italian government bonds and German Bunds have narrowed.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Aston Martin looks set to miss out on a spot in the FTSE 100 after the luxury carmaker cut the maximum valuation it is seeking in its initial public offering today, bloomberg reporting IPO price at £19.
Telecoms and industrials pushed the Japanese Topix, so watch their partners on the European open, whilst miners faired well in Australia. The miner heavy JSE is likely to follow suit this morning.
The Dow Jones hit a record closing high, but a drop in Facebook shares weighed on both the S&P 500 and Nasdaq. FANG stocks, kept the Nasdaq in check. Facebook closed down 1.91 percent.
Euro strengthens during Asia Pacific trading hours as Italy plans to cut its budget deficit.
Oil prices eased slightly after rallying for three straight sessions, but remained close to four year highs.
Boris savaged May’s Chequers plan as he made a pitch to the tory faithful for his own policy agenda.
DAX is going to be trading out of hours as it is a public holiday (German Unity Day)
Asian overnight: A largely bearish session has seen the Australian ASX 200 provide the one bright light in an otherwise downbeat period. That comes despite a more than 9% drop in housing approvals for August, dragging AUDUSD lower. Emerging market currencies were sold heavily in the session, with the Indian Rupee in particular continuing to lose ground against the dollar.
Oil prices dipped on Wednesday, weighed down by a report of rising U.S. crude inventories and an expected increase in production. U.S. commercial crude inventories rose by 907,000 barrels in the week to Sept. 28 to 400.9 million, the private American Petroleum Institute (API) said on Tuesday. Despite this, prices remain near four-year highs reached earlier this week ahead of U.S. sanctions against Iran's oil exports that kick in next month. Official weekly government data is due from the Energy Information Administration (EIA) today at 15.30 BSP.
UK, US and Europe: US dollar strength is having an effect on EM currencies with the Indian rupee hitting record lows, and the Indonesian government stepping in to support the rupiah. Knock on effect to respective indices could be one to watch.
Mays speech today in Birmingham will be key and a big test as she is trying to contain civil war. She’ll call for unionism and insist she is fighting for a Brexit deal in the nations interest. Key things to look for will be her decision on the border – she is due to speak at 10:00am BST.
Italy seems to give into EU-mandated austerity as the government will stick with its plan for 2.4 percent for 2019, while reducing the targeted gap to 2.2 percent and 2 percent for the two successive years respectively, according to Corriere. The government had originally said it would aim for 2.4 percent for all three years. Developed countries sovereign bond market and the term ‘volatility’ do not go hand in hand. For Italy this is a bit of a problem who are still seeing sharp swings in their debt markets over 4 months after the populist government was voted into power. Whilst price action on the surface may seem attractive, a lack of substance behind the claims made by Rome to Brussels on planned spending near invalidates a call to action for any investment. At this point we’re seeing momentum trades and speculation, another two words sovereign bonds don’t want to hear about. Those who are interested in this sort of trade could look towards the differential trade against the German bond market, a key barometer for eurozone political tension. Moodys and S&P are set to update their outlooks for Italy this month.
Looking ahead, the big European event of note comes in the form of the UK services PMI. Fresh off the back of a disappointing construction number and strong manufacturing one, this release has the biggest impact of the three on UK economic growth. Italy is likely to remain in focus, with the coalition seeking to confirm a budget in the shadow of the EU.
South Africa: We are expecting a flat to marginally higher open on the Jse All-Share Index, as US Index Futures trade higher and Asian markets trade mixed this morning. Commodity prices are trading firmer this morning while the rand is slightly weaker against the majors. This is suggestive of a positive start for local resource counters, a notion furthered by the fact that BHP Billiton is up 1% in Australia this morning. Tencent Holdings is down 0.7% in Asia, suggestive of a slighlty lower start for major holding company Naspers.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
Corporate News, Upgrades and Downgrades
Tesco reported a 2.2% rise in first-half pre-tax profit, to £564 million, while revenues rose 11% to £31.7 billion. Sales rose 2.2% on a like-for-like basis. The dividend was raised by 67% to 1.67p per share.
Vodafone said that its Italian unit had acquired spectrum for the development of new 5G technology for €2.4 billion.
Metso Upgraded to Overweight at JPMorgan
Siemens Downgraded to Hold at HSBC Atlas Mara Downgraded to Hold at Renaissance Capital
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Macro-drivers: Global markets endured a night of mixed trading, sandwiched between several risk factors, and the waning optimism of the USMCA. US indices were generally lower, although the large-cap Dow Jones managed to register new all-time highs. European markets were held back by grief surrounding Italian fiscal sustainability, coupled with lingering concerns about the outcome of Brexit. The general sense of risk aversion led to an appreciating USD and climb in US Treasuries, pushing yields on the benchmark 10 Year Treasury note to 3.05 per cent. Oil cooled its run somewhat as commodity traders took a breather, as WTI and Brent Crude clocked gains above $US75.00 and $US85.00 per barrel, respectively. The overnight session establishes an uninspiring lead for the Asian markets in general, auguring a mixed day ahead.
ASX: SPI futures are pointing to a slight uplift in the ASX200 this morning, backing up a day which saw the Australian share market shed 0.75 per cent. There were really no winners on the day, with the only sector coming-out in the green being the energy sector. The financials couldn’t halt their sell-off, declining another 1.12 per cent yesterday, while the losses were compounded by a reversal in the price of CSL, which led the health care sector 1.36 per cent lower on the day. The breadth of gainers for the session were low again at 23.5 per cent, and volume was robust, indicating the (on balance) bearishness of this market. Momentum hasn’t shifted dramatically to the downside yet, but yesterday’s break of support at 6160, and close just above support at 6120, suggests some sluggish times ahead for Aussie shares.
RBA: The local session yesterday was bereft of truly impactful news, but of course attention was duly allocated to the afternoon’s meeting of the RBA. No surprises were what was expected, and no surprises is what traders got: there was a tip of the hat to the accuracy of the central bank’s growth forecasts of +3 per cent, a reiteration of only a gradual return of full employment and at-target inflation, and a very soft warning of how low wage growth and high private debt levels may hinder household consumption. The reaction in interest rate markets was dull, but slightly to the downside: bets of a hike from the RBA got pushed back to March 2020 as opposed to February 2020, according the ASX 30 Day Cash Futures markets.

Aussie Dollar: The Australian Dollar came-off shortly after the meeting however, slipping from about 0.7230 to plunge beneath support at 0.7200. To the naked eye it would appear a reaction to what was (perhaps) a dovish RBA, but close inspection suggests the impetus lay somewhere else. Risk currencies sold-off in tandem at around 3.00PM (AEST), as news broke out of Europe about Euro-policy makers concerns about Italian fiscal policy and the possibility of an Italian default. The spread on Italian and German 10 Year bonds widened once more (to currently trade around 300 basis points) sending the EUR to 1.1540 as funds flowed into the safe-haven USD. Naturally, the AUD suffered as a result, to presently just shy of 0.7190.
Italy and Europe: The Italian fiscal situation in looming as a major risk for the European economy. It is not getting quite as much local press as it deserves, though this is in a sense justifiable given the preoccupation with the grave implications of the US-China trade war. The crux of the issue in Europe relates to the ruling “populist” government in Italy, and its reluctance (or even refusal) to comply strictly with the Eurozone’s rules regarding sovereign budget deficits. The recent Italian budget has tested European bureaucrats’ patience, leading to a rebuke yesterday from European Commission President Jean-Claude Juncker, igniting a counter-response by key Italian “League” politician Claudio Borghi, who stated Italy could solve its problems if it controlled its own currency. The hostility swept through European bond markets, spurred a sell-off in equities and pushed the EUR well into the 1.15 handle.
Greenback: The US Dollar was the inevitable beneficiary of Europe’s woes, climbing to a 6-week high, in DXY terms, to 95.50. The trading activity is a reminder of the two-pronged benefit of long USD positions at-the-moment: the US Fed’s determination to hike interest rates is attracting yield chasers, supporting the greenback, while the litany of global risks is pushing traders intermittently into safe havens, also supporting the greenback. The upward trend has cooled for the USD of late, leading to calls that the currency could be creeping towards a top. But with US Fed Chairperson overnight talking up the “extra-ordinary” times experienced by the US economy, as well as talking down the prospect of out of control inflation caused by tight labour markets and increases in global tariffs, the underlying bullish-trade remains well justified for the greenback.
US Indices: A question raised by such bullishness from market participants and policy makers alike is, how much further can the US equity bull run last? It’s foolish to ever call tops on any market, especially one that is apparently founded on such strong fundamentals. The benchmark S&P500 and NASDAQ traded lower overnight, though both indices sit within reach of new all-time highs. The far narrower Dow Jones index, however, registered a new intraday high during the US session, climbing 0.46 per cent to close at 26773.94. A word of warning must be disclaimed with the Dow Jones as relatively high as it: though one wouldn’t want to call a marked sell-off, rallies for the Dow Jones that extend this far above the more comprehensive S&P500 often result in a pull back for the Dow Jones, as traders buy into the index in an attempt to enter-and-exit the market on the basis of rosy-sentiment.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Hong Kong’s Hang Seng index pulled back last night with gambling shares having a bad time after falling revenues in Macau's casino region. US-Sino tensions rise as a US ship enters Chinese territory. Stay on top of currency markets as trade war tensions rise with #IGForexChat.
The financial and healthcare sectors pushed the ASX lower whilst China remained closed for another public holiday. Bank of Australia holds cash rate at 1.5%.
Japan’s Nikkei was the lone star in the Asian overnight session with a positive reading.
USD/JPY climbs to 11 month high as speculators increase their short position on the yen.
Euro looks to rebound following the Italian budget movement. Analysts suggest it may return to its previous trend, albeit a bearish one.
Continued speculation for the conservative conference today with Theresa May expected to announce some concessions in her Brexit deal. Boris Johnson to speak later today. Yesterday saw a volatility spike in GBP/USD which we could see again today on the right type of news.
Aston Martin has cut its maximum share price for its IPO from £22.50 down to £20 flat. The valuation toward the higher end of this downgrade should see the car manufacturer still slip into the FTSE 100 at £5bn, with the lowest constituent currently £4.7 in the existing index. Niche demand for high end luxury manufacturing by fund managers was the culprit. Expectations are still there for an IPO this week.
Asian overnight: Japanese markets remained the one area of strength yet again overnight, as the ASX 200 and Hang Seng traded in the red once more. China remains on holiday and will be so for the rest of the week. The big overnight data point came in the form of the RBA rate decision, with the bank retaining rates at 1.5% as expected. The bank continues to see issues in the form of low household income growth, risks to consumption, and inflationary pressure from rising oil prices, pointing towards continued low rates for some time yet.
As public sentiment on pollution changes in China many are speculating on a repeat of last years movements in the liquefied natural gas market going into the colder months. Last year LNG imports were nearly 50% higher than the previous year. The key uncertainties for the market will be weather conditions (the colder the better for bullish traders), and whether or not the Chinese government has managed to maintain and hold onto its inventories and reserves (in which case the lower the better). LNG could be an interesting market to follow over winter as public sentiment on pollution hasn’t changed much from 12 months previous, and strong demand in Europe continues to buoy the price. You can blame that on an increase in carbon emission credit cost (boosting demand for cleaner fuels) and a colder start to the year.
UK, US and Europe: Looking ahead, the UK construction PMI provides the centre point of European trade, with markets likely to continue looking towards any statements or rumours around Brexit for further GBP volatility. Keep an eye out for appearances from Fed member Quarles and Powell in the afternoon.
South Africa: Equity markets are under pressure once again this morning, led by declines in European Futures. Markets are drawing concern from Italy's budget proposal, which the EU have said could invoke a Greek styled financial crisis. US Futures are trading mixed. In turn, we expect the Jse AllShare index to open up marginally lower this morning. Metal prices are trading slightly firmer this morning while oil prices continue to post significant gains in the wake of looming Iran sanctions and OPEC's suggested capacity constraints. Tencent Holdings is down 2.2% in Asia, suggestive of a weaker start for major holding company Naspers. BHP Billiton is trading 0.25% higher in Australia, suggestive of a marginally positive start for local diversified resource counters.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
9.30am – UK construction PMI (September): expected to rise to 55 from 52.9. Market to watch: GBP crosses
Corporate News, Upgrades and Downgrades
Ferguson reported pre-tax profit for the year rose 16.6% to $1.19 billion, while revenue was up 7.6% to $20.75 billion. The dividend was raised by 21% to 189.3 cents per share.
Ryanair said that volume rose 11% in September, though strike action caused the cancellation of 400 flights in the month.
Revolution Bars said that pre-tax losses were £3.6 million, from a profit of £5.2 million a year earlier.
Datatec has released a trading statement for 1H19 guiding that headline earnings per share is expected to be between 0.5 and 1 US cents (1H18 Reported: loss per share of 5.8 US cents).
Group Five Ltd FY18 results showed a loss per share of 1334c which compares with a loss per share of 829c in the previous year.
Credit Agricole raised to overweight at Morgan Stanley
Metso upgraded to overweight at JPMorgan
Atlas Mara downgraded to hold at Renaissance Capital
Danske Bank cut to equal-weight at Morgan Stanley
Royal Mail downgraded to underweight at JPMorgan
Learning Technologies Group downgraded to add at Peel Hunt
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Deal done: Hopes were whetted during overnight trade from the news that the US, Mexico and Canada had agreed to a revised “NAFTA” agreement. To be (re)named USMCA – the US-Mexico-Canada-Agreement, a clear declaration of the Trumpian neo-Nationalist, “America First” agenda – the trade agreement reconfigures the North American trade consensus, with a skew towards US economic interests. It was apparently the Canadian’s who finally caved in to political and economic pressure on the trade pact, backing down on dairy tariffs and restrictions on US-automotive imports, judging that a deal with the White House was better than no-deal with the White House. Without stripping-back the surface to dig around the details, markets responded favourably to the news – a total sentiment play – with the prevailing view being that this sets the foundations and framework for new deals with the US’s other trade adversaries.
Relief-rallies: Because of this view, reactions to the news were asymmetrical – not leading to a broad-based lift in risk appetite, but a relief rally in markets within geographies targeted by US President Trump’s protectionist ire. The big uplift was in Japanese markets during the Asian session, owing mostly to the fact it was one of the few markets open yesterday in the region: the Nikkei jumped to 27-year highs, to float about the 24,300-mark, a level futures markets are indicating will be exceeded once more today. The embattled DAX lifted during the European session to ram solid resistance against that index’s downward trendline, while the industrial-laden Dow Jones led US indices higher, to trade (at the day’s highs) only 30 points away from fresh record levels.
Risk-currencies: Proving that it wasn’t a sweeping relief rally on financial markets overnight, certain risk assets and global growth proxies behaved apathetically to the USMCA announcement. Our own Aussie Dollar was one, barely blinking as the news hit the wires, spending the day’s trading in a tight band between 0.7200 and 0.7225. The price-action on the USD/CNH provided the best insight into market perceptions regarding how this will impact the US-China trade war, floating further towards the 6.90, conveying that friendliness between North American allies won’t translate to a reduction of animus between the US and China. Naturally, it was the USD and CAD that experienced the solid bidding for the day, with the greenback appreciating against most G10 currencies, with the CAD being the obvious exception to this, which rallied 0.9 per cent to dive back into the 1.27 handle.
ASX: The narrow-effects of overnight’s relief rally isn’t expected to manifest a great-deal in the ASX200 today. SPI futures are pointing to an 8-point advance at the open this morning, backing-on from a day in which the benchmark Aussie index stripped just shy of 0.6 per cent. The index found its comfort zone, right within its recent trend channel and just below its 20-day and 100-day EMAs. Volumes were light because of the public holidays in China, Hong Kong and parts of Australia, but not absurdly so. Sellers were drawn into the market in haste, primarily driven by fear about likely weakness in the market’s besieged financial sector. The dynamic dragged the rest of the market lower for the day, keeping the breadth of gaining stocks to below 30 per cent.
Banks: The ASX200 will struggle to reclaim fresh decade long highs with the banks facing the sell-off that they are. While not performing tremendously well by many measures throughout the year, it's been with the support of sporadic rallies in the financial sector that has provided the ASX the basis to form concerted runs higher. Yesterday's sell-off of around 1.50 per cent across the sector portends a challenging final calendar-quarter for the banks and therefore the Australian share market, as investors approach the belief that the policy outcomes of the Financial Services Royal Commission will result in profit-crimping regulatory changes. It's a phenomenon that many-a punter will feel appropriate and necessary, but the likely crack down on the banks will likely hurt shareholders, especially while the exact policy recommendations remain unclear.
RBA today: The day's trade today will be highlighted by the month's RBA monetary policy meeting, out of which the central bank is unanimously tipped to keep rates on hold. The accompanying statement is where the interest will lie, with the focus once more on the outlook for Australian households – particularly considering the release of yesterday's CoreLogic housing data, which revealed Australian property prices continued to fall last month. Rates markets nor the currency are likely to shift much on the news coming out of Martin Place at 2.30PM, but a degree of curiosity (if nothing else) will be directed to the assessment of wage growth, inflation and consumption, particularly ahead of Thursday's domestic retail sales data print.
Other news: Summating the stories rotating at the periphery of financial markets in the last 24 hours: PMI figures threw-up mixed results overnight: UK figures demonstrated above forecast numbers, while European figures were generally at expectation and US print was slightly below. The data provided little insight into the fundamental effects of the trade-war on the supply side, and traders promptly moved on from these release consequently. European bond markets are still a point of concern, selling-off amid fears of Italy’s deteriorating fiscal position, coupled with worries about the effects of the ECB’s Quantitative Tightening program. The EUR/USD is out of vogue subsequently, plummeting now into the 1.15 handle, after touching highs above 1.18 just last week.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

The U.S. and Canada agreed to a trade deal that would preserve a three-way bloc with Mexico, setting the stage for their leaders to sign the accord by the end of November. The new deal will be called the U.S.-Mexico-Canada Agreement, or USMCA.
Mexican peso and Canadian dollar gains as uncertainty is lifted and greater stability takes hold of the Americas.
The euro was hit by worries about a rise in Italy's fiscal deficit after the Italian government agreed to set a higher than expected budget deficit target that could put Rome on a collision course with Brussels.
In the UK this week the Conservative party is holding its annual conference. Brexit talks are bound to be high on the agenda and could cause some volatility as the narrative continues to play out. Hammond could also add flavour to this years budget which could hint at trading opportunities to come.
Tuesday sees a speech by Jay Powel. After the Feds interest rate rise last week speculators will be looking at any hints they have on monetary policy.
Asian overnight: A somewhat mixed session overnight has seen the Japanese markets push into the green, while the Australian ASX 200 provided the opposite move in the absence of Chinese and Hong Kong markets due to national holidays. Weekend data from China did little to raise confidence for Australian stocks, with the manufacturing PMI and Caixin manufacturing PMI both declining. The non-manufacturing PMI survey did rise, yet Australian concerns are certainly focused on the manufacturing sector as a lead to how their exports markets will fare going forward. Finally, the Japanese Yen declined on the news of weaker figures for the Tankan manufacturing index, non-manufacturing index, and manufacturing PMI.
UK, US and Europe: The euro was hit by worries about a rise in Italy's fiscal deficit after the Italian government agreed to set a higher than expected budget deficit target that could put Rome on a collision course with Brussels. Italian Finance Minister Giovanni Tria is certain to face questions about the nation’s 2019 spending plan even though it’s not on Monday’s Eurogroup agenda in Luxembourg.
Theresa May faces the battle of her political life to retain control of the governing Conservative Party as top Tory politicians undermined her leadership. After arch rival Boris Johnson went for the jugular, Chancellor Philip Hammond swept in to defend her in an increasingly chaotic political scene.
Looking ahead, we have a host of economic PMI releases from Europe, although for the most part they are final readings. That being said, the UK manufacturing PMI is one of the few figures that represents the first release for the month, with markets looking for a marginal decline. That PMI theme carries into the US session, with manufacturing figures from both Canada and the US. Given the breakthrough in NAFTA negotiations, expect to see continued volatility for the Canadian dollar and Mexican Peso.
South Africa: The Jse Allshare Index is expected to open firmer amidst today's positive global equity market sentiment. Commodity prices are trading marginally lower and the rand slightly weaker as the dollar finds some short term strength. BHP Billiton is down 0.1% in Australia, suggestive of a flat to slightly lower start for local diversified resource counters. Today's economic calendar is light in terms of scheduled data releases, with UK and US manufacturing data perhaps the most relevant catalysts to look out for today.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
9.30am – UK mfg PMI (September): survey forecast to rise to 53.8 from 52.8. Market to watch: GBP crosses
3pm – US ISM mfg PMI (September): forecast to fall to 60.5 from 61.3. Markets to watch: US indices, USD crosses
Corporate News, Upgrades and Downgrades
Tesla likely to dominate headlines today as the SEC ruling that Elon Musk should stand down as chairman (but maintain his CEO position).
Nielsen Interim CEO of Danske as Borgenfor relieved following money laundering scandal.
Assura continued to grow during the first half of the year to 30 September 2018, completing the acquisition of 39 medical centres and two developments at a combined cost of £108.2 million.
HNA Group Co. shrinks debt by $8.3 Billion. More needed to regain trust of investors.
TMX Group earnings release above expectations.
Barclays upgraded to buy at Berenberg
Castings upgraded to buy at Peel Hunt
Thomas Cook upgraded to hold at Berenberg
Kaufman & Broad raised to hold at Kepler Cheuvreux
AB InBev downgraded to hold at Jefferies
EasyJet downgraded to underperform at Bernstein
Sampo downgraded to neutral at JPMorgan
Telecom Italia cut to underweight at Barclays
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

ASX: SPI futures are indicating a 23-point drop at the open for the ASX200 this morning, effectively wiping Friday's solid gains. It comes as no surprise, really, with the lion's share of activity centring around the embattled financial sector. Bank stocks underpinned the rally on the ASX on Friday, led by CBA, in signs that the market believed the sector's recent trend lower was overdone. It may be a case of jumping the gun for traders on that one, as sentiment appears sour once more following the weekend's release of the Financial Services Royal Commission interim report. The materials and energy sector did its bit on Friday to carry the ASX higher, courtesy of a broad-based, though modest, uptick in commodity prices; while the health care sector continued to erode its market leading YTD gains, led by a near 2 per cent fall in the CSL shares, creating drag on the overall index.
ASX technicals: The price action on the ASX200 was much livelier on Friday as compared to previous days last week, perhaps a sign of increased bullishness following days of anxiety leading into the Fed. An overarching theme is lacking for the ASX now, leading to a mixed sentiment across different sections of the market. Volume was high during Friday's session, especially as the index toyed with the 6230-mark, an important level of support/resistance in recent months. Considerable profit taking emerged at that level, pushing the market well in line with its recent (more-or-less sideways) trend. The pattern appears set to continue today, in the absence of a fundamental impetus or a strong external lead.
China update: The strong possibility of thin liquidity may hinder the market today, and perhaps the rest of the week, thanks to the week-long Golden Week public holiday in China. The relationship has diminished somewhat of late, but Australian markets have taken the lead of its Chinese counterparts in recent months, as fears around China's economic activity feed through to Australia. Despite not being out of the woods yet, signs are looking more promising in Chinese equity indices now, which have managed to stick fat to key technical support levels in the past week. The interesting story for those invested in Chinese assets this week will be how the USD/CNH fares with Chinese traders out of action, with the Yuan looking vulnerable to the downside towards the very important level of 6.90, following the release of weaker Caixin PMI figures over the weekend.
PMI data: Speaking of PMI data, one of the significant themes this week will be the release of a spate of PMI figures across several geographies. As a great leading indicator of economic strength, particularly considering the escalating trade war, PMI numbers have softened in recent months, presumably because of tighter trade conditions. The poor Chinese PMI print sets up the release of corresponding figures in Japan, the UK, and the US today, with traders of the industrial laden Dow Jones, Nikkei and DAX surely paying attention. Given a leitmotif in markets last week was the Fed's optimistic view on global growth into the next 12 months, the data dump of global PMI data provides the first opportunity to test this proposition, and subsequently form a position on this state of markets leading into the final calendar-quarter for the year.
US indices: Wall Street (for one) will be entering into a curious and frenetic period as the new month rolls around, as traders prepare for what is typically the hottest period for US equity markets. The results for North American equities were lukewarm on Friday, with major US indices holding flat for the day. The so-so performance for US shares throughout last week was still enough to ensure the strongest quarter for US equities in 5 years and place those markets well in touch of all-time highs. The element of the present trade dynamic that may make-or-break the market this quarter is how it weathers upcoming US mid-terms: US shares typically stall in the month leading into such an event, notwithstanding that this round of elections appears a vote on the confidence, support and legitimacy of US President Trump.
Europe and the DAX: European markets look to remain stuck in the middle of several local and international themes. Concerns lingered over the weekend regarding Italian fiscal policy, along with ongoing fears about a no-deal Brexit and the effects the US-China trade war will have on Europe’s fledgling economic recovery. The DAX has demonstrated the sentiment-sapping effects of these confluence of factors, remaining trapped in a downtrend since mid-June, even despite rallies higher in indices with comparable trading behaviour, like the Nikkei. The downward trendline currently at 12,430 will be a formidable barrier for traders, with a solid hold above support at 12,100 required to set the foundations of a swing in momentum and a trend reversal in the near-term.
Oil: A status check of activity in the oil market should be undertaken to start the new week. The price of the black stuff continues to rise, on the back of greater concerns around production and supply on global markets. The US sanctions on Iran seem to be more impactful than first believed, exacerbated by the view that OPEC+ won’t be bullied nor cajoled by US President Trump to fill the gap in supply. The US President reportedly reached out personally to Saudi Arabia’s King Salman on the weekend to discuss the matter, highlighting the risks higher prices will have on global growth and market stability. No firm outcome was reported out of the interaction, as some more bullish commentators grow louder in their calls that no change to the present trade dynamic will see oil fly to $100USD in Brent Crude terms.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Markets Heading into October and the Fourth Quarter
With this past Friday, we closed out week, month and quarter. The shortest measure was a period of consolidation for most assets – from the top performing US equity indices to the EURUSD’s make over break technical move to trade back into range. More impressive for its deviation from character (statistical norm) was the performance for the month of September. Historically, this period is one of significant upheaval for the capital markets (see the attached images). Using the S&P 500 as the imperfect standard bearer, September is historically the only month that has averaged a loss in the calendar year as volume picks up and volatility measures rise. That clearly was the case for 2018 and it also wasn’t true of 2017. Using the same study to evaluate October, it would suggest that significant gains are ahead for October. However, if one month’s average can deviate from the norm, so can any other’s – there is a reason it is called the law of averages.
Statistically, the range of the samples for the monthly performance for the benchmark is wide in signal. For measures of activity – via volume for the same index and volatility from the VIX – there is far less ‘spread’ in the readings. Volume rises through the month of October as the post-Summer lull and pre-holiday trade period draws in active market participants looking to weigh in on market direction. Volatility similarly peaks in October historically, which makes an interesting combination of circumstances. Traditionally, volatility rises as risk aversion kicks in while a rise in volume behind market moves frequently signals commitment to trend. Of course, how the market commits depends on what is motivating capital distribution (positioning).
It is possible to see assets with a ‘risk’ bearing bid as there is a host of assets that currently stand at a significant discount to the S&P 500’s record high. An ‘idolizing’ speculative play would depend on complacency and the avoidance of possible disruptions from the fundamental current. To propose a windfall improvement in economic and investment circumstances in the multi-speed environment with protectionism continuously rising is an approach akin to passing through the eye of a needle. Spinning our wheels around current levels is certainly a high probability given the market’s penchant for the status quo, but it is difficult to miss the laundry list of troubles we have yet to reconcile. With trade wars escalating and political risks growing (US election cycle, UK government fracturing over Brexit approach, EU facing another budgetary rebel), we should keep track of scheduled and ‘mundane’ influences like GDP readings as if they are asteroids that we discover are on a collision course with the planet.
A Two Speed Trade War the Break in the Clouds?
The updates on trade wars for the new week offer a modicum of hope that we can stave off an utter collapse into a global economic conflict. Yet, with so much riding on a steady bearing of economic activity, avoidance of financial troubles amid monetary policy normalization and even the whims of a single powerful individual (the US President); it would be careless to put so much faith into apathy. Between the United States and China there is as yet no sign of improvement – nor even a let up from further escalation of force. Following the United States implementation of a further range of tariffs on an additional $200 billion in Chinese goods and China’s $60 billion rejoinder, the situation has been in negotiation limbo.
An effort to revive talks seems to have hit the skids and the only sliver of solace is that President Trump didn’t move immediately to execute his threat for a further $267 billion duty on its largest economic counterpart should it retaliate against the latest effort – which of course, it did. Perhaps the smaller response has bought them relief, but the ideological belief for both of these countries as to their righteous efforts likely leads this particular course to a ‘total’ engagement. We will soon run out of room to add more items to the tax list. New policy outlets will need to be explored, and they will either be ignored by the markets and populations which will only encourage desperation for those looking to exact pain in order to force capitulation or it will exact the intended pain. Either way, it ends in the same economic trouble. Of course, as far as this pain is isolated to these two countries, the better off the world will be.
This past week, Japanese Prime Minister Abe managed to elicit the same vow from President Trump that EU President Juncker earned: no new import taxes so long as discussions continue. Of course, the US already slapped tariffs on both region’s steel and aluminum imports, but they may let that go so as not to provoke further lash out. Yet, progress will likely lack until there is some tangible blood sacrifice to appease the Trump administration’s demands for more favorable trade conditions. Meanwhile, the effort to steer the NAFTA deal to a successful conclusion is the most encouraging corner of this global pressure. Yet again, language this weekend has tempted hope that a deal is close at hand, but investors are acutely aware that the suggestion of a proximate deal were raised and dashed multiple times over the past week. If an agreement does go through, other US counterparts will evaluate what was agreed to as a template for charting their own course to a resolution.
What is Driving the Dollar = What Can Drive the World
What is driving the US Dollar? I like to keep particularly close tabs on markets or benchmarks that are at the center of so many overlapping fundamental considerations. Over the past months and years, I have paid particularly close attention to the S&P 500, gold, USDJPY and others for their ability not to cue trade opportunities of their own but rather to act as signal for the system at large. At present, the Greenback reflects that ‘deep cut’ market perspective that can offer seismic shift for the financial system at large. Starting from the most recent of the rapidly growing fundamental concerns, political uncertainty is moving out of the tabloid-like headlines into the tangible expectations of an impending mid-term election. We are six weeks out from the polls opening, and the country and world are even more on edge than usual for the event. Partisan appetites and beliefs should be kept out of our evaluation or market effect, rather it is the sense of uncertainty that breeds concern for the financial system. A turn in either of the houses can make an already difficult-to-operate government virtually grind to a halt.
Meanwhile, the ongoing trade war may be multi-faceted and hosting many different participants, but there is an easily recognizable common denominator amid all of it: the US. Not content to lead the world to general growth, the country has pressured its trade partners to sacrifice some of their own advantages to accelerate its own pace. There is little doubt that its size could be used to leverage capitulation from a few counterparts, but engaging a host of the world’s largest players runs the risk of a collaborative retaliation or simple an effort to reduce exposure to avoid themselves being held hostage so readily again in the future. That would be a significant and permanent downgrade to the United States’ financial position and its currency. Of course, it is possible that all of these countries yield – but what is the probability of that? And, lest we forget, there are also traditional fundamental themes that are as-yet resolved of the US.
The Fed continues to push forward with a policy effort clearly set to normalization with steady hikes and reduction in balance sheet. After the last Fed hike, the central bank made it known that it expects to hike again in December and three more times in 2019. That can be encouraging from a carry perspective, but it doesn’t bode well for markets that depend on low lending rates such as corporate debt and real estate. Higher yields to be found in the US relative to other countries is appealing only so long as the markets are set to unhindered risk appetite. Yet, with dollar-denominated loans for areas like the emerging markets seeing rates soar to tip nonperforming loans, this divergence from the world norm can be the spark for its own immolation.

Expected index adjustments
Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 1 Oct 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect your positions, please take a look at the video.
NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a cash neutral adjustment on your account. Special Divs are highlighted in orange.
Special dividends
You can see the special dividends listed below. Unfortunately we do not have granular insight on the effect on the index for the index in question, however the below maybe helpful for some. Please note the dates below are the stock adjustments in the underlying individual instrument, whilst the index div adjustments are taken out the day before on the IG platform at the cash close.
Index
Bloomberg Code
Effective Date
Amount
UKX
BDEV LN
11/10/2018
17.3
AS51
ASL AU
03/10/2018
2.8571
RTY
KRNY US
02/10/2018
16
As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is affected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements.
How do dividend adjustments work?
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Yesterday the US Federal Reserve raises interest rates for the 3rd time this year.
Asian stocks post negative sessions following the Fed announcement being led by the technology and energy sectors.
Major currency pairs hold steady whilst the USD basket, despite initial volatility, traded largely flat. Minor gains have been made this morning putting the dollar about a quarter of a percent up.
Oil continues to climb as investors continue to be cautiously optimistic that the Iranian sanction void can’t be easily filled.
Upbeat comments by Mario Draghi on rising pay and inflation expectations helps boost the euro.
Gold continues to trade in a tight range. This is a perfect time for traders to start following the precious metal as volatile movements are likely to follow as traders jump on a break out.
German CPI data for September and US GDP Q2 / August Trade Balance figures are the ones to look out for today.
Asian overnight: The US Federal Reserve increased the benchmark lending rate by 0.25% last night (as was expected). The central bank has suggested that another rate hike in 2018 may be on the cards, as the US economy shows signs of further strength. A bearish session overnight has seen losses across the board, with Japanese stocks suffering the most. Yesterday’s expected rate rise came alongside a rise in expectations for a December hike, sparking dollar strength. With all the talk of the ‘neutral rate’, it is clear we are not quite there yet. We also saw the RBNZ rate decision, where the New Zealand central bank decided to retain the current rate of 1.75%.
UK, US and Europe: Looking ahead, a somewhat quiet European session drives the focus straight back onto the US, with core durable goods, trade balance, and the Final GDP figure all released at once. We also have a series of appearances from central bankers, with Draghi, Powell, and Poloz all appearing throughout the afternoon and evening.
South Africa: US Index Futures and Asian markets are trading flat to marginally lower this morning suggestive of a similar start for our local bourse (The Jse AllShare Index). The rand remains firm at around R14.15/$. Tencent Holdings is down 1.9% in Asia suggestive of a weaker start for major holding company Naspers. BHP Billiton is 0.1% lower in Australia, suggestive of a flat to slightly lower start for local resource counters.
Commodity prices are trading slightly firmer after marginal losses yesterday. When it comes to spot gold the percentage of traders net-long is now its highest since Aug 09 when it traded near 1211.76. Paul Robinson of DFX noted that “If the monthly high (1212) or low (1187) [of golds range bound movement] aren’t broken by the close on Friday, this month’s range will rank as the smallest in over 22 years. That almost certainly won’t last another month.”
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
10am – eurozone business confidence (September): forecast to drop to 1.15 from 1.22. . Market to watch: EUR crosses
1pm – German CPI (September, preliminary): forecast to fall to 1.9% YoY from 2%. Market to watch: EUR crosses
1.30pm – US GDP (Q2, final reading), durable goods order (August), Personal consumption expenditure prices (Q2, final): GDP to rise 4.2% QoQ, durable goods orders to rise 1.7% from -1.7% MoM, and increase 0.5% from 0.2% MoM excluding transportation orders. PCE prices to rise 2.6% QoQ from 2.5%, and core PCE prices to increase by 2% from 2.2% MoM. Markets to watch: US indices, USD crosses
3pm – US pending home sales (August): forecast to fall 1.9% YoY from a 2.3% drop in July. Market to watch: USD crosses
Corporate News, Upgrades and Downgrades
Saga reported a 4% fall in first-half profits, to £107 million, although it said its retail broking policy count was back to levels seen in the first half of 2017. Expenses fell to £120 million from £126 million a year earlier.
TUI said that trading was in line with expectations despite the hot summer, and it maintained its guidance for underlying earnings to rise 10% this year. Trading for the future season was in line with forecasts at this early stage.
Entertainment One said it remains on track to hit forecasts after its family and brands segment performed well in the first half.
Adcorp Holdings released a trading statement, guiding that Total basic earnings per share of between 82 cents and 100 cents is expected, which compares to a total basic loss per share of 120.7 cents in the prior years comparative period (ending 30 August 2017).
Wood Upgraded to Hold at Jefferies
RWE Upgraded to Buy at DZ Bank Investec upgrade Anglo Platinum with a target price of 48000c BMW Downgraded to Hold at SocGen
DEFAMA Downgraded to Accumulate at SRC Research Investec downgrade Pick n Pay to sell with a target price of 6900c
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Asian stocks are broadly higher ahead of the Fed rate decision later today, whilst the NZ dollar is buoyed by higher business confidence.
Trump and Iranian President Hassan Rouhani came to a head at the UN General Assembly on Tuesday with the US President vowing more sanctions against Tehran, whilst President Rouhani suggested that Trump suffers from a "weakness of intellect." Trump is really trying to bring the price of oil into play before the midterms as high oil prices could hit the Republican vote.
Oil pulls back after Trump's comments on OPEC whilst bonds and currencies are broadly steady.
When it comes to trade wars it may be worth keeping an eye on the USDCNY pair. BCA research and the head of economic research at UBS both speculate that the Chinese renminbi could weaken to 7Rmb against the dollar before the end of the year.
According to an internal document reported by reuters, EU negotiators are ready to offer Theresa May a free-trade area in Brexit, however they are adamant that there must be a customs border that will trade less than frictionless.
The Argentinian peso, an EM currency which has seen news inches this quarter, slide as much as 5% as the central bank chief quits just three months into the job.
Globally IPO’s have slide by nearly 1/5th this year amid geopolitical tensions, whilst money brought into via the process has increased by 10% according to accountancy firm EY.
Asian overnight: Asian markets enjoyed a largely positive session, as trade concerns faded despite Trump’s UN speech which heralded an America first approach rather than rampant globalisation. The New Zealand dollar came into favour overnight, gaining ground in the wake of a strong business confidence figure. This despite a deterioration in their trade balance figure, with imports rising and exports shrinking.
UK, US and Europe: Today sees all eyes turn to the Fed, with the FOMC due to announce their latest monetary policy decision. The simultaneous release of the latest FOMC economic projections should ensure volatility for the dollar and US stocks markets. Apart from the Fed, the European session sees little of note, with new home sales and crude inventories the other numbers to watch out of the US.
Record breaking divergence between the US equity market and the rest of the world could see a significant movement of money out of Wall Street and into other markets in Europe and Asia. The S&P has gained 9% this year alone and has created the biggest difference between its continued all time highs and the rest of the world putting it at its most extreme levels since 1970. US consumer confidence is at a 17 year high whilst manufacturing activity reached a 14 year high. According to BoA ML analysts, investors have built up a significant level of US equity exposure over the last three years. A mass exodus could see significant movements. This could potentially provides an interesting trade opportunity if the flow into Asia and European markets tips as investors, traders and speculators search for greater returns - the players to keep an eye on however are the institutional investors and money managers.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
3pm – US new home sales (August): expected to rise 2.2% MoM. Market to watch: US crosses
3.30pm – US EIA crude inventories (w/c 21 September): stockpiles forecast to fall by 480,000 barrels from a 2 million barrel drop a week earlier. Markets to watch: Brent, WTI
7pm – FOMC decision (7.30pm press conference): the central bank is expected to raise rates to 2.25% from 2%, but this is all but a foregone conclusion, so the market impact will be in their projections for future rate rises, their assessment of the US economy and the impact (if any) from the US-China trade conflict. Markets to watch: US indices, USD crosses
Corporate News, Upgrades and Downgrades
SSP said that it expected like-for-like sales in its financial year to grow by 2-3%. Growth in Q4 was similar to Q3, driven by increased passenger numbers.
PZ Cussons expects overall results for the quarter to the end of August were in line with forecasts, as growth in Europe and Asia offset a poorer performance in Nigeria.
AA said that higher callouts due to bad weather and potholes hit pre-tax profit for the first half, which fell to £23 million from £64 million a year earlier.
Boohoo reported a 50% rise in first half revenue, to £395 million, with international revenues now 40% of the total. Sales growth for the full year is now expected to be 38-43%, from a previous guidance of 35-40%.
Bouygues upgraded to overweight at JPMorgan
Next upgraded to neutral at Goldman
Randgold upgraded to sector perform at RBC
Scandic raised to equal-weight at Morgan Stanley
Deutsche Boerse downgraded to sell at Bankhaus Lampe
Grammer downgraded to sell at Quirin Privatbank AG
Kier downgraded to neutral at JPMorgan
Telenet downgraded to equal-weight at Barclays
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

The overarching narrative in global markets is transforming from one preoccupied with the trade war, to one focused on Thursday morning’s (AEST) meeting of the US Federal Reserve. As far as developments in the trade war go, in a week bereft other major stories, traders are demonstrating tentative signs of ease on the subject. Markets are strapping themselves in for the long haul, and a begrudging acceptance that this thing will take time to play out is the prevailing mentality. With that in mind, and with only a laugh-worthy speech from US President Trump at the UN overnight to seriously fill the macro news void, the dominating theme is one of preparation for the US Fed meeting and a possible new world of gradually higher interest rates. That’s not to say that other news isn’t coming to the fore and causing volatility in pockets of financial markets, but for market-fundamentalists, everything begins with what the Fed will do with US rates.
Rates and Bonds: Because of this, it has been in fixed income markets that any remarkable price action occurred during the North American session. Far from it was there a great deal of volatility, especially in terms of flow on effects to equity indices – what with the Dow Jones and S&P500 down 0.2 per cent and 0.1 per cent respectively and the NASDAQ up by 0.2 per cent. Rather, the structural shifts in markets and the subsequent revision of trader’s collective view on global interest rates continued to gradually play out, led by the belief that tomorrow morning we will see a hawkish Fed. The dynamic led to benchmark US 10 Year Treasuries teasing 7-year highs near 3.13 per cent, as interest rate traders firmed their bets that tonight’s Fed forecasts will imply 2 more hikes this year and at least another 1-and-a-half in 2019.
Europe: European markets during their earlier trading session were swept-up in the same theme, though it must be remarked that European equities performed quite well. European bonds drifted in the slip stream of falling US Treasuries, with the yield on 10 Year Gilts approaching year-to-date highs at 1.63, and the yield on 10 Year German Bunds ticking up to 0.54 per cent. Equities performed respectably, with the FTSE adding 0.66 per cent for the day and the Euro Stoxx 50 climbing 0.27 per cent. The continent’s equity indices are generally still down for the month, but a recent lift in risk appetite courtesy of firmer certainty in Chinese and emerging markets has supported European shares. This greater degree of confidence has underpinned strength in the EUR, which made another play above 1.18 overnight, as calls grow louder that that currency has turned a corner and is due for a sustained run higher.
China: Chinese markets traded as expected yesterday: indices sold down. But perhaps to the relief of many, the outcome wasn't as severe as was feared. The fortunes of Chinese indices have hinged on the judgement of what capacity Chinese policy makers have in supporting their markets, given the likely drag tariffs will have on the export focused economy. China's equity markets are some way from being out of the woods, especially because this trade war looks poised to last for the rest of this year, at a minimum. Despite this, Chinese large cap stocks are presenting low valuations, and by some measures last week's equity rally broke the market's existing down trend. Yes, traders are still selling rallies at a well-defined point in Chinese indices, but perhaps this pattern reflects an emerging, stable range trade that these markets can settle within, before making a break higher once positive sentiment turns at some point in the medium term.
ASX: The foundations laid by these stories has SPI Futures pointing to a slim 4-point jump at the open for the ASX200, following a day of ultimately flat trading for Australian shares. It wouldn’t be too bold too suggest that overall price action on the Aussie market was dull yesterday. Similar forces that have driven the trading-tides on the market recently drove the ASX again yesterday: surging oil prices boosted energy stocks, while marginally greater optimism regarding global growth helped the materials space extend its weekly gain to over 4 per cent. IG data has the market opening at 6195 this morning, right at a notable selling point for traders of late -- and just below the ASX200’s 100-day EMA, which for several weeks has proven the key marker of resistance for the index.
Japan: There was also lively activity in the region’s other powerhouse financial centre during the Asian session: Japan’s markets posted another bullish day, again shrugging off the various problems weighing down its regional neighbours. The improvement in global risk appetite manifested in the Yen, as that currency renewed its battle with formidable resistance at 1.1300. The weaker currency combined with a (typically) dovish Bank of Japan minutes conspired to push the Nikkei higher, which stuck fat around the 28,000 level. Though it always takes some gall to trade near new highs, particularly considering Japanese shares are underpinned by improving fundamentals, shorting the Nikkei here may become a popular view, with index’s recent run deviating someway from previous trend line support
Commodity wrap: A brief mid-week commodity wrap may be appropriate here, in light of the fact economic data and news flow is relatively light. Oil is holding the commodity complex together for the best part, demonstrating signs that a base above $80.00USD and $US72.00 per barrel in Brent Crude and WTI terms respectively is emerging. The price of bellwether Copper is down on the week on fears of slower Chinese growth but remains significantly about the month’s $US5800 lows. Gold prices have been relatively unresponsive to the USD’s recent weak spell, conveying a steady balance of buyers and sellers within the yellow metal’s trading range between $US1195 and $US1207. Finally, iron ore prices are also down on the week after that metal bumped its head on resistance last week, to presently trade in Dalian terms around the 500-mark.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Asian equities diverge, as Chinese shares fall and Japanese shares climb.
The Euro jumped on Monday after Mario Draghi of the ECB signalled that policymakers are on track to reduce stimulus measures. He stated that the bank was confident it could maintain inflation targets over the next few years.
In the EM space, India's Nifty Fifty stock market is seeing a sell off after reports that a major lender is struggling to service $12.6bn of debt. The index is down 7% since highs seen in the latter half of last month.
Instagram founders quit the Facebook acquired business less than 6 months after WhatsApp founders do the same.
Oil prices are remaining at their 4 year high despite some inevitable profit taking. As Reuters reports "US sanctions against Iran and unwillingness by OPEC to raise output supported the market."
In the crypto space more than 75 of the worlds largest banks are joining the Interbank Information Network to see if blockchain technology can speed up payments and remittance processes.
US Consumer Confidence is the macro data to look out for later today.
Asian overnight: The Japanese and Chinese markets have reopened following yesterday’s bank holidays with a disconnect between the two. The breakdown in talks between the US and China understandably continues to weigh on Chinese stocks, with the ASX 200 also in the red. Meanwhile, both Japanese indices have been gaining ground amid a strengthened USDJPY. Crude prices hit a four-year high following the decision from OPEC to not raise production over the weekend. Metal prices are trading flat today.
UK, US and Europe: A quiet calendar ahead sees the US consumer confidence figure provide the one notable event of the day. With the Chinese trade talks continuing to sour, the expectations of a weaker reading are not surprising. Global markets are trading mixed this morning as they wait for their next directional catalysts, which are likely to be updates on the Brexit and Trade war narratives later this week.
As gold prices continue to echo the swings seen in the USD, the market is generally looking towards Wednesdays FOMC monetary policy announcement before a direction is confirmed. Whilst from a technical perspective gold seems confined to a fairly tight range, it is pushing towards the falling 1220 target.
South Africa: The rand is trading slightly firmer this morning. The JSE Allshare index is expected to open flat to marginally firmer this morning. BHP Billiton is up 0.8% in Australia suggestive of a positive start for local diversified resource counters.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
3pm – US Conference Board consumer confidence (September): expected to fall to 131.3 from 133.4. Market to watch: USD crosses
Corporate News, Upgrades and Downgrades
Next has seen a 0.5% rise in first half profit, to £311.1 million, while sales were up 3.8% to £1.99 billion. Full-price sales rose 4.5%, ahead of the expected 2.2%.
Imperial Brands said that it remains on track to hit full-year revenue and earnings guidance, thanks to a stronger second half due to an improved tobacco price mix and increasing next generation product revenue.
McCarthy & Stone will focus on cost-cutting, looking to save £40 million a year by FY 2021. It will produce around 2100 new homes a year, while looking to improve margins.
Alfa Laval upgraded to reduce at AlphaValue
Boliden raised to equal-weight at Morgan Stanley
Curasan upgraded to buy at Montega
Epiroc upgraded to buy at DNB Markets
Investec upgrade Anglo Platinum with a target price of 48000c
Auto Trader cut to equal-weight at Barclays
Sky downgraded to hold at Jefferies
BHP downgraded to equal-weight at Morgan Stanley
J D Wetherspoon downgraded to hold at Peel Hunt
Investec downgrade Pick n Pay to sell with a target price of 6900c
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Trade War: Markets were made to curb their enthusiasm overnight. Trade war realities bit again and the relief rally that had defined last week’s trade dissipated. It’s not a terrible cause for alarm yet, but it highlights how difficult to predict the impact on global trade disruption happens to be. It’s a debate that challenges orthodoxy, especially given that markets have done all they can to shrug off the potential consequences new-protectionism will have on global growth. Inefficiencies abound in such a system, one must assume, but whether this leads to a rapid slowdown in global economic activity, the answer remains challenging to ascertain. The heightened political tensions and the subsequent (and intermittent) sap on investor sentiment will be a constant, but to what extent this flows into fundamental matters of global inflation and interest rates, earnings growth within equity markets, and appetite for commodities is still unclear.
Asia: Far be it to speculate on the matter, the fact is traders took the weekend’s trade war escalation seriously. A lack of volume during the Asian session courtesy of well-timed public holiday’s in Japan and China blanketed the issue, meaning a solid read on how markets currently judge the trade war will rely on today’s trade. But nevertheless, global equities pulled back as a result of the news, with the industrials space hit the hardest by fears of slower global growth. During Asian trade, the Hang Seng was treated as the canary in the coalmine, what with its close proximity and ties to Chinese markets. The results weren’t great, as Hong Kong shares shed 1.32%, setting up a day for European and North American markets that began on the back foot.
Overnight: Futures markets had the overnight session poised for losses, and as North America winds up for the day, it’s what traders have (generally) received. There was a lot of noise pushing indices (in particular) around overnight, over and above the very core concerns relating to the US-China trade war. US politics was one of the main wails in the cacophony, after it was reported that US Deputy General Rod Rosenstein will resign from his job. The news jolted US investors, but the losses associated with that story were reclaimed throughout the day. Of the major US indices, a tech bounce helped the NASDAQ finish the day in the green, but overall the session was one characterized by an attitude of wait and see, with US markets not selling off anywhere near enough to suggest the run of record highs is over yet.
US Bonds: The fact risk appetite hasn’t truly been wiped, but has more been put on ice, manifested in bonds markets. This week is being defined by a push-and-pull between the ever-present trade war story, and the positioning leading into Thursday morning’s (AEST) meeting of the US Federal Reserve. A world of higher interest rates is being priced into markets at the moment, with US 10 Year Treasuries ticking up to 3.09 per cent again last night. Even more remarkably, the US 2 Year Note pushed to 2.81 per cent – noteworthy considering that only a month ago the 10-year was yielding the exact same – as traders apparently endorse the Fed’s view for future interest rates. Notwithstanding US yields however, the US Dollar has dipped (very slightly) again to start the week, as did the Yen, as traders spread themselves more evenly across the G4 currencies.
Europe: The reason for this diversifying across the major safe haven currencies is probably fourfold: one, it pays to spread risk around in the lead-up to a Fed meeting; two, though the trade-war has markets nervous, we aren’t in a risk-off environment yet; three, a new Brexit referendum on the Brexit deal was floated last night; and four, ECB President Mario Draghi delivered a very hawkish speech overnight. Regarding the final point, in a testimony to European bureaucrats in Brussels, ECB President Draghi pressed his view that underlying inflation in the Eurozone would soon pick-up. The commentary led to a jump in European sovereign bond yields and a challenge of the EUR/USD above 1.18. The price action was reasonably short-lived, with both of those asset classes recalibrating after a period. But the comments prove that markets are priming for a (relatively) higher interest rate world – ahead of a day that will welcome Bank of Japan monetary policy minutes and a speech from BOJ Governor Haruhiko Kuroda.
ASX: The ASX200 will open trade today with these various events as context, establishing a SPI futures market that has the market opening down 8 points. Trade yesterday was supported by the fact that regional concerns were left to simmer by virtue of China and Japan’s public holiday. Volume was very light, and while diminished risk appetite saw the AUD/USD pull back from resistance around 0.7300 to about 0.7250 at time of writing, the ASX200 traded well in line with established patterns. It’s a sort of malaise plaguing Australian shares that is keeping things subdued: the ASX is trading on macro themes and second-tier stories, revealing a reluctance by traders to push this market too far beyond 6200. It was a pick-up in energy stocks because of higher oil prices, combined with a lift in the telco-space following news the TPG-Vodafone merger is good to go, that kept the ASX200’s losses to a modest 0.1 per cent.
Oil: On oil, the price of Brent Crude and WTI ticked higher overnight, as commodity traders buy into the view that a shortfall in supply won’t be hastily addressed by key oil producing nations. Tweet-storm or no-Tweet-storm, US President Trump’s demands for lower oil prices have gone unheeded, creating the perception that OPEC+ won’t bend to the will of the US President. The price of Brent Crude shot over $US80.00 a barrel last night, while WTI leapt over $US72.00, leading to calls that the price of the black-stuff (in Brent Crude terms) could shoot to $US100 per barrel. That call is surely premature, and it is doubtful that OPEC+ would hold its nerve in the face of US scrutiny long enough to see this occur. But a play into the mid-$80 isn’t off the cards, with some short-term key levels to watch at $81.67 and $US83.75.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Expected index adjustments
Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 25 Sep 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect your positions, please take a look at the video.
NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a cash neutral adjustment on your account. Special Divs are highlighted in orange.
Special dividends
You can see the special dividends listed below. Unfortunately we do not have granular insight on the effect on the index for the index in question, however the below maybe helpful for some. Please note the dates below are the stock adjustments in the underlying individual instrument, whilst the index div adjustments are taken out the day before on the IG platform at the cash close.
Index
Bloomberg Code
Effective Date
Summary
Dividend Amount
UKX
MRW LN
27/09/2018
Special Div
2
UKX
HL/LN
27/09/2018
Special Div
7.8
NKY
1803 JP
26/09/2018
Special Div
600
HIS
1109 HK
24/09/2018
Special Div
13
AEX
RAND NA
24/09/2018
Special Div
69
RTY
PCH US
26/09/2018
Special Div
354
RTY
KRNY US
02/10/2018
Special Div
16
How do dividend adjustments work?
As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is effected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Oil prices at 4-year high after OPEC declines to raise supply
Bank holiday in China and Japan
Trade Talks: Abe's trade discussion with Trump is "constructive" in second round, China will only hold trade talks once Trump stops threats
Trade wars cause the European markets to dip, Brexit is also affecting sentiment
Dollar remains steady, whilst Indian rupee drops
Asian overnight: A largely bearish affair overnight saw losses through the Hang Seng and ASX 200, as Japanese and Chinese markets enjoyed national holidays. The recent tariffs imposed by the US (and in turn China) have knocked back hopes for trade negotiations between the two biggest countries, with market sentiment taking a turn at the knowledge that the trade war will rumble on for some time yet. Meanwhile, crude prices rose after OPEC (and Russia) decided against raising production at Sunday’s meeting despite calls from Donald Trump to help drive prices down.
UK, US and Europe: Looking ahead, a somewhat quiet economic calendar draws our attention to the German IFO business climate release, alongside the afternoon appearance from Mario Draghi. Expect the euro to be in focus, with last month’s sharp IFO bounceback expected to flounder, with a somewhat less impressive figure this time around.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
9am – German IFO index (September): business climate index to rise to 104 from 103.8. Market to watch: EUR crosses
1.30pm – US Chicago Fed index (August): expected to rise to 0.2 from 0.13. Markets to watch: US indices, USD crosses.
Corporate News
Michael Kors is said to be near agreement to buy Italy's Versace.
Randgold Resources has agreed to a merger with Barrick Gold to form an $18.3 billion company. Randgold shareholders will get 6.128 Barrick shares for each Randgold share.
Pennon said trading remained in line with forecasts and it was still on track to hit full-year expectations.
Comcast beat Fox in $39 billion Sky auction.
Thomas Cook has downgraded annual earnings guidance due to the warm summer weather. Earnings before tax and interest are now expected to be around £280 million. Total group bookings were up 12% over the year, but prices were down 5%.
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Geopolitics is already shaping-up as the major driver of financial markets this week. Data is rather light, with the US Federal Reserve’s meeting on Thursday morning (AEST) the centrepiece of an economic calendar otherwise filled with a handful of central-bank-head speeches and a meeting of the RBNZ. Hence, traders will find themselves sucked into a vacuum that can only be filled by noise surround the global economy’s biggest contemporary international-political hot-points. The break-down in talks between the US and China was once again the most significant of these, but a shift in sentiment will also be underlined by increasingly frosty negotiations between the UK and Europe, along with tensions between the US and oil producing countries. The core matter for will be how these clear risk-off factors conspire with the US Federal Reserve’s meeting to impact traders, on the back of a week that was defined by a tangible relief-rally.
China cancels talks: The Chinese formally cancelled trade talks with the US on Saturday afternoon. It was what markets had feared this time last week, and true to their word, China kept to its line that it would not negotiate with the US while under duress. Frankly, how markets react to this news will be curious today, given that global markets shrugged off-last week’s developments to jump into riskier-assets, pushing US indices to all-time highs. Will this escalation in the trade-war be taken in stride by markets, or does this amount to the flashpoint that traders have been long fearing? The truth – as always – will probably sit somewhere between these two poles, but what looks assured now is that this trade-war is a battle of attrition: China will not have the long-term vision for their country disrupted; while US President Trump will not stop until he can achieve what he considers victory.
Brexit backwards step: Global geopolitical problems weren’t contained to just Asian over the weekend. In a noteworthy reversal of fortunes, Brexit negotiations deteriorated further, after UK Prime Minister Therese May delivered a hostile public address rebuking the EU’s treatment of her and her country at the latest summit in Salzburg. Markets didn’t like the UK Prime Minister’s approach, hitting the sell button on the Pound, sending that currency from a multi-week high around 1.33 before the news, back within the 1.30 handle (at time of writing). The greater hostility between the UK and EUR raised once more the spectre of a Brexit no-deal, which looks increasingly likely as the October/November deadline looms. Watch for activity in the EUR/USD this week, particularly considering the scheduled speech of ECB Mario Draghi tonight, for hints that a no-deal outcome is being priced into markets, as that pair shrugs off the weekend’s news to challenge three-month highs at about 1.18.
Trump, Oil and OPEC: The politics of oil rounded off the weekend’s tripartite of geopolitical troubles. In response to a US President Trump Twitter-tirade last week regarding a spike in oil prices, OPEC+ defied the US President calls to boost oil production to lower oil prices, stating that the organisation was currently doing enough to meet demand. The commentary opens-up a possible push higher in oil prices above $US80 per barrel (in Brent Crude terms) – a mark that has been consistently threatened in the past month. That price point still appears the comfortable level for Brent Crude despite US President Trump’s protestations, amounting to the mid-point between its multi-year high and low prices. However, some degree of overshooting looks possible in the short term, with $US83.75 jumping out as the next significant technical level.
ASX: SPI futures are indicating a 23-point drop at the open for the ASX200 against this backdrop, following on from a week where Australian equities showed tentative signs of strength, but appeared capped to the upside in the short-term. The pattern of higher lows continued to end last week’s trade, with resistance around 6190/6200 for the ASX200 holding firm to create an ever-tightening wedge pattern for the index. Though a sign of reluctance from traders to push the market higher, the trade dynamic does suggest a pent-up bullishness that may provide a pop to the upside provided the right circumstances. It will be a matter today -- and for the rest of the week – of whether such activity can occur in an environment of heightened geopolitical risks. Intuition says no, but too often have we seen the counter-intuitive play out in this market.
Australian Dollar: The benefit for Australian traders is that we may not have to look any further than our own currency to get a gauge on this. The AUD/USD spiked higher last week, spurred by the greater risk appetite brought about by (at least the illusion) of greater certainty in financial markets. The local unit launched off support around ~0.7150, to trade towards the very top of its well-defined trend channel at (at the time) around 0.7300. It would take something remarkable to push the AUD above this trend channel this week, particularly considering the economic fundamentals underpinning the market. A certain amount of profit taking should be expected at these levels too, especially given the conspicuousness of the AUD/USD’s trend. The interest will be consequently in how well the currency holds itself at these levels: it will be the best measure of trader perceptions regarding the latest escalation in the trade war.

Wall Street: The fortunes of Wall Street indices will be worth assessing in the next 24 hours as a result of the heightened trade war tensions. The industrial heavy Dow Jones traded in line with the strong activity in the DAX and Nikkei on Friday, to close trade at new all-time highs at 26,743, while a sell-off in tech shares contributed to a fall in the NASDAQ and S&P500 of 0.51% per cent and 0.04% respectively. The extent of China’s hostility, at least according to the perception of traders, will be revealed by activity in the major tech stocks, which have come under pressure in recent weeks due to fears that China may target tech-company’s supply chains. Furthermore, it may be in this sentiment that dictates whether US stocks can hit new all-time highs in the week ahead: growth in US tech stocks have been the core factor behind Wall Street’s trend higher, so flatness in the sector could see the benchmark S&P500 recede back within its firmly established trend channel.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Trade Wars Update: It No Longer Matters?
Seemingly a routine occurrence for the global financial markets, we saw the state of global trade deteriorate yet again through the past week. As expected, the United States went forward with tariffs on an additional $200 billion in Chinese goods. The terms are for a 10 percent rate on a range of imports that will increase to 25 percent by the end of the year. The standard, immediate response from China was quickly implemented, but only on $60 billion in US goods. It is not clear the strategy from China as they vowed a ****-for-tat response to what they have deemed unprovoked trade wars, but the country does not have much more room to tax imports from its major counterpart – and certainly not $200 billion worth of goods. This alone moves us into a new phase of a standoff of escalating cost for the US, China and the world.
Will China ease off the pressure? Are they simply plotting an alternative course? Could this be an attempt to prevent President Trump from pursuing his threat to trigger the $267 billion in further duties in the event of a reprisal to the $200 billion? It isn’t clear. With the situation clearly under greater tension, the news over the weekend that plans for further talks had broken down ensures greater financial threat from this already-enormous burden. What is even more remarkable than the state of trade from these two economic leaders is the apparent state of obliviousness from the speculative markets. While certain assets show greater disregard to the threat than others (the S&P 500 is at a record high while the EEM Emerging Market ETF is only modestly off its multi-year low), they have all displayed a measure of neglect these past weeks as the tab has grown exponentially.
To suggest that this situation simply doesn’t matter would be recklessly negligent. It isn’t impossible that speculators accustomed to complacency and FOMO, but it would nevertheless increase the scope of risk to stability through the future. Ignoring the dangerous wobble in a tire as you steadily accelerate down the freeway is not a reasonable state even if we can sustain it for the time being. If we continue to build up exposure until a severe economic or financial crisis arises, it will only amplify the eventual collapse.
What is Eating the Dollar and How Long Does it Dine?
The Dollar marked an important technical tumble this past week. Already under pressure over the past months, the DXY’s drop below 94.35 and EURUSD charge above 1.1700 represents the break of ‘necklines’ on head-and-shoulders patterns (the latter inverted). This is pressure not isolated to the trade-weighted aggregate or its heavily represented most liquid pairing. We can see the currency’s unique struggle intensifying distinctly across the spectrum over these past few weeks. But with this evidence of broad struggle, we should attempt to identify its source if we intend to establish the intent of follow through – whether persistent or near its conclusion. Reverting to an old textbook relationship, some are connecting the currency’s traditional safe haven role to the recent rebound in risk assets – including record highs for certain benchmark US indices.
That would be a tidy explanation, but is suspicious for its timing considering this haven function hasn’t played a significant role for months. Further reason to question this relationship is the explicit status for the Greenback as the highest yielding major currency. That advantage will likely increase this week as the Fed is expected to hike rates another 25 basis points to a range of 2.00-2.25 percent. It could be the case that the currency’s premium could be deflating under expectation that the central bank is planning to downgrade its pace of tightening at this meeting through the Summary of Economic Projections (SEP) and Chairman Powell’s press conference. Yet, we don’t see that anticipation in assets that more directly relate to such forecasts - overnight swaps and Fed Funds futures.
Political risk will prove an increasingly prominent risk through media headlines in particular over the coming weeks, but there is little direct threat to economy or financial markets just yet. This slow reversal of a six-month old bull trend may also have developed in response to the longer-term concerns. Over enough time, the accumulated cost of engaging in a multi-front trade war while increasing the budget deficit during a healthy economic phase will erode the appeal of the United States’ currency’s principal status. It is possible that this long-term pressure is starting to set in; but if that is the motivation, it can readily be sidetracked by more intense short-term concerns (like next week’s FOMC decision).
Political Risk Increasing as US Election Cycle Heats Ups
Political risk is an abstract fundamental influence on the financial system. Certainly each trade has their political beliefs on policies ranging from economy to social causes; but more often than not, these views only cloud our assessment of the markets. It is generally-accepted market wisdom to remove emotions from our trading; and there are few things in life that more readily trigger emotion than politics. Practically-speaking, however, there is little in the way of policy that can readily translate into significant market movement in the short-term. That said, one of the few outlets with a direct link to financial health and stability is the state of international relations. And, on that front, the danger has grown visibly and exponentially. Perhaps one of the most obvious instances of this pressure on net global growth and capital rotations through trade comes from the United States.
The Trump Administration has driven forward with hefty tariffs and economic sanctions on some of the largest economies in the world. Whether we personally view the policies as good or bad / right or wrong, the economic impact is straightforward. As time marches on, attention on politics will intensify with the mid-term elections approaching. While much of the high drama related to the balance of the Legislative branch, threats of Presidential impeachment and the Supreme Court pick has little to do with the kind of direct market implications that we should keep in the forefront; it can nevertheless bolster the appreciation of economic and financial connection by virtue of its mere presence in the headlines. What’s more, this is not a uniquely US concern. There is political pressure rising across the world.
Reports of a possible election call in the United Kingdom have followed the failure of progress in the Brexit negotiations at the EU leaders summit in Salzburg. Mainland Europe is not immune to systemic risk via political pressures. Italy is still a massive concern to stability between its enormous debt and populist government. Poland and Hungary pose a threat to core EU beliefs – and have drawn criticism for such – owing to their nationalist governments’ policies. In Asia, financial pressure is starting to show subtle cracks in social contentedness while US sanctions have spilled over from Russia restrictions. Japanese Prime Minister Abe managed to keep his position this past week, but the economic and international diplomatic position or the country has not improved materially. The question investors should ask themselves is whether these relationships improve for compromise or rapidly intensify should economic or financial crisis start to emerge.

Global equity markets are shining with the Japanese Nikkei hitting an 8-month high, Chinese shares on course to make their biggest weekly gains in 2 years, and a strong earnings outlook expected to continue.
US stock market also looks to continue it's march to record highs are strong fund inflows support the market. Figures released on Thursday by EPFR Global quoted a $14.5bn inflow.
The Hong Kong dollar (pegged to that of the USD) strengthened early Friday ahead of the US Federal Reserve meeting next week, and an expected rise in interest rates.
Brent crude has its eyes on $80 a barrel and is currently trading at its highest level in 4 years, all despite efforts of Trump's Tweets for OPEC to "get prices down now".
Crypto exchanges have hit back at a damning NY Attorney General report. Assets in the sector have rallied over the last session with bitcoin up around 5% in the last 4 days, and ether pushing a 17% gain in the same time period.
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questions to our expert panel now! Asian overnight: Asian markets are back on a positive footing, with the Chinese indices leading the gains amid widespread upside. This week has largely seen the markets take an optimistic outlook to US-China trade talks, and the gains seen overnight are an extension of that. On the data front, Japan was the centre of market focus, with national core CPI rising to 0.9% (from 0.8%), while the flash manufacturing PMI rose less than expected to 52.9 (from 52.5). Oil prices were mixed after falling in the previous session as President Donald Trump urged OPEC to lower crude prices ahead of its meeting in Algeria this weekend. For many industrial buyers and energy companies out there it seems they are cautious and possibly expectant of higher prices in the future.
UK, US and Europe: New data out recently has shown that the US has become the EU's largest supplier of soyabeans, with nearly 1.5 million tonnes supplied in the last quarter. This shows an increase of nearly 130% compared to the same period last year. This is seen as important by both Brussels and Trump, as it featured prominently in the President's plan for improving US-EU relations. Looking forward this could signal a success for both sides, as continued efforts to "reduce barriers and increase trade in services, chemicals, pharmaceuticals, [and] medical products".
Europe is ending the week in busy fashion, with a raft of eurozone PMIs released throughout the morning. Manufacturing and services PMI readings from the likes of France, Germany, and the eurozone should keep the euro in focus. In the US session, we also see those same PMI readings released later in the day. Also keep an eye out for the Canadian retail sales and CPI numbers. Finally, given the current events surrounding oil, Trump and OPEC it's going to be increasingly important to stay up to date with figures out on the black gold. Baker Hughes should keep you in your chairs at 6pm BST today.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
8am – 9am – French, German, eurozone mfg & services PMI (September, flash): French services PMI to rise to 56.1 from 55.4, and mfg fall to 53.4 from 53.5. German services PMI to rise to 55.1 from 55 and mfg to fall to 55.4 from 55.9. Eurozone services PMI to hold at 54.4 and mfg to fall to 54.4 from 54.6. Markets to watch: eurozone indices, EUR crosses
1.30pm – Canada CPI (August), retail sales (July): CPI to be 2.8% YoY from 3% and 0.2% Mom from 0.5%. Core CPI to be 1.5% YoY from 1.6%. Retail sales to rise 0.4% MoM from -0.2%. Markets to watch: CAD crosses
2.45pm – US mfg & services PMI (September, flash): mfg to fall to 53.8 from 54.7, and services to fall to 53.6 from 54.8. Markets to watch: US indices, USD crosses
Corporate News, Upgrades and Downgrades
Smiths Group said pre-tax profit for the year was down 28% to £435 million, while revenue fell 2% to £3.21 billion. Operating margin fell 110 basis points to 16.9%.
SIG reported a 28% drop in operating profit, to £26.9 million, while revenue was down 4% to £1.38 billion. Poor weather in the UK hit performance, but the trading environment was better in mainland Europe and Ireland.
EDF upgraded to neutral at Exane
Enel upgraded to outperform at Exane
Maersk upgraded to buy at HSBC
Endesa downgraded to neutral at Exane
Suedzucker downgraded to sell at Bankhaus Lampe
Verbund downgraded to underperform at Exane
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Stocks pull back in the Asian overnight market after a tepid close of Wall Street last night.
Bellwether metals copper and zinc, along with other industrial metals, continue their rally as investors and traders focus on increasing demand rather than US-Sino relations.
Rio Tinto announced a $3.2bn share buyback scheme, and whilst the Anglo-Australian miner saw 3.2% gain the ASX didn’t follow suit and ended down slightly. Potential swings on the UK Rio listing on the open.
In EM currencies, the SA Rand rallied on Wednesday after consumer price growth slowed according to inflation data. This comes ahead of the rate decision today - one to keep an eye on amid potential volatility.
A solid reading on New Zealand’s economic growth GDP figure pushed the NZ dollar higher.
US dollar index was down around 0.1%, with the euro trading at around 1.168 USD whilst 10 year treasuries are up around 10 basis points in the last week.
US crude inventories saw a three and a half year low yesterday whilst gasoline saw a pullback. Both energies were up on the news and have seen consolidation since. This could be one to watch today for any profit taking or movement on the back of trade talk news.
The president of the Financial Action Task Force, the global anti money laundering body, has said he’s optimistic about agreeing a set of standards for AML procedures applied to crypto and virtual currencies.
Retail Sales in the UK, US initial jobless claims, and the EU press conference are the macro data areas to look out for today.
Asian overnight: A much less decisive and convincing session overnight has seen Asian markets largely exhibiting moderate gains in a day that has seen them oscillate around the market open level. The one loser on the session came from Australia, with the ASX 200 falling after a report from the RBA said that in an all-out trade war, the AUD could significantly strengthen. The NZD was one of the strongest currencies of the session, following an improved GDP number of 1% for Q2.
UK, US and Europe: Theresa May stated yesterday that she will not accept Brexit offers that treat Northern Ireland as a separate customs territory, after the EU proposed to keep the region within its customs union and single market. Further to the Financial Action Task Force statement on cryptocurrencies discussed above, the UK's Treasury Committee has announced that the country could soon implement regulatory reforms for Cryptocurrencies, to address poor security, extreme volatility and excessive anonymity. The proposed aim is to make the UK a legitimate home for crypto trading and become a major trading centre.
Looking ahead, the UK is back in focus with the release of the latest retail sales number. Volatility over Brexit has been influencing the pound and thus traders should also watch out for any further comments from the UK or EU. In the afternoon, keep an eye out for the US Philly Fed manufacturing index and existing home sales. Meanwhile, the eurozone comes back into play, with consumer confidence and an appearance from Bundesbank President Weidmann later in the day.
South Africa: Global markets are giving ambiguous signals today for the JSE as US Index futures and Asian markets show a mix off marginal gains and losses this morning. There is little in the way of new news to guide markets today although South African traders and speculators will keep a watchful eye on the Reserve banks monetary policy meeting this afternoon.
Lending rates are expected to remain unchanged, although there remains a possibility of a marginal rate hike. The rand remains firm leading into the news event. Tencent Holdings is up 0.25% in Asia suggestive of a marginally positive start for major holding company Naspers. BHP Billiton is trading 1.14% higher in Australia, suggestive of a positive start for local resource counters.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
9.30am – UK retail sales (August): sales to rise 0.2% MoM and 2.7% YoY, from 0.7% and 3.5% respectively. Markets to watch: GBP crosses
1.30pm – US initial jobless claims (w/e 15 September), Philadelphia Fed index: claims to rise to 208K from 204K, while the Philly Fed index rises to 15 from 11.9. Markets to watch: US indices, USD crosses
3pm – eurozone consumer confidence (September): confidence index to rise to -0.7 from -1.9. Markets to watch: EUR crosses
3pm – US existing home sales (August): forecast to rise 0.6% MoM from a -0.7% fall. Markets to watch: US indices, USD crosses
Corporate News, Upgrades and Downgrades
Rio Tinto has announced details of its $3.2 billion share buyback, combining an off-market tender of $1.9 billion and additional on-market purchases.
Stobart said that passenger numbers at its London Southend airport rose 37% for the first half.
Kier Group reported a 9% rise in underlying pre-tax profit for the full year, to £137 million.
Diageo said that the new financial year had begun well and that performance remained in line with expectations. Heightened exchange rate volatility is expected to hit operating profit for the year by around £45 million.
Aveva upgraded to overweight at Barclays
Weir upgraded to overweight at Morgan Stanley
Bayer upgraded to buy at Citi
Proximus upgraded to buy at Citi
Essity downgraded to neutral at Goldman
Nokian Renkaat downgraded to sell at Carnegie
Telenet downgraded to neutral at Citi
Telefonica Deutschland downgraded to sell at Bankhaus Lampe
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

ASX yesterday: SPI futures are indicating a 5-point jump at the open for the ASX200, as traders continue to ride the wave of relief washing-over global markets. The boost in global commodity prices has underpinned the bounce in the ASX, with the materials and energy sectors leading the charge higher. Commodities markets maintained their run overnight, collectively climbing 0.76 per cent according to the Bloomberg Commodity Index, while the price of oil also threatened to challenge new highs, holding around the $US79 per barrel in Brent Crude terms. The dynamic reflects well the increased optimism around global growth since the anxiousness relating to the US-China trade war receded, translating consequently to a sharp pang of increased risk appetite for global investors.
ASX prospects: The curious point today however will be in the assessment of what ability the ASX200 has to push back toward decade long highs. Undoubtedly, the Australian share market has participated in the global bounce in risk appetite this week, but to a far lesser extent to other major global equity indices. This may well be because that although the ASX has pulled back some way from its recent decade long highs, it didn't suffer the same initial damage as other global indices did. The market is missing some of the drivers that fuelled the ASX200's rally, with the growth stock heavy healthcare space still lagging, and the lower Australian Dollar not attracting investors like it has (until lately) been.
Global equities: It means that there is the risk that the ASX200 is taking its turn at trailing behind the pack, especially if a firm lead from global indices can't be followed. European and North American markets built well upon the foundations established by Asian equities yesterday, particularly that set by the Nikkei, which challenged multi-month highs at 23,900. The FTSE and DAX added 0.4 per cent and 0.5 per cent during Europe's session, and the Dow Jones rallied 0.6 per cent during Wall Street's trade. Granted, the benchmark S&P500 only edged 0.1 per cent higher, weighed down by a pullback in the tech stocks that saw the NASDAQ lose 0.1 per cent, however both of those indices sit only modestly away from all-time highs.
China: The ingredient necessary to another breakout in global indices and the ASX200 may well hinge on sentiment regarding Chinese markets. Despite recovering considerable territory this week, adding to calls that China's indices have found a bottom, the overall trend for those markets remains in place. Using the CSI300 as the benchmark, yesterday's rally to 3312 places that index within touching distance of key resistance at 3400. Traders have opted to sell rallies on several occasions at that mark, reflecting doubts that Chinese equities are capable of a trend reversal in the short term. A breach and hold above that resistance line should be treated as a noteworthy shift in the view investors have on the Chinese market, and signal that broader global indices have scope to push higher.
Rates and bonds: A potential risk to the future strength of equities markets is the run higher in global interest rates. Even when the worst fears about the US-China trade war have prevailed over the last month, prices in international bond markets continued to slip, driven by the view that the US Federal Reserve can and will hike interest rates at the rate it desires. Interest rate traders have practically fully priced in an interest rate hike from the US Federal Reserve next week, with another hike in December priced at an 80 percent chance, and another 1 and a half priced in for 2019. The result has been a climb in US Treasury yields, with benchmark US 10 Year Treasuries now yielding about 3.07% - about 4 points shy of the yearly high.
Currencies: Of most concern to equity market bulls is that it appears this is a phenomenon no longer contained simply to the US: CPI data out of the U.K. last night showed a significant jump in inflation, printing at 2.7%, pushing up the likelihood of another rate hike from the Bank of England early next year. The Pound challenged levels above 1.32 after the release of UK CPI data, seemingly carrying the EUR with it, before both currencies retraced their gains, dragged down by lingering doubts about Brexit. The trade dynamic put more pressure on the US Dollar, dragging the USD Index through trendline support, and pushing up the price of gold back towards its resistance at $1207.
Australian Dollar: The weaker USD has aided a rally in the AUD, which, combined with Chinese Premier Li Keqiang’s comments yesterday that China would not look too weaponize the Yuan, has pushed the AUD/USD to around 0.7250 at time of writing. The Australian Dollar has been the trade-war risk proxy of choice for traders of late, naturally leading to a rally in the Aussie this week amid easing fears of an escalation in the spat between the US and China. It must be implored that the down trend is still intact for the AUD/USD and will likely remain so given the widening yield disadvantage between USD and AUD denominated assets. However, there is scope for a modest rally higher for the local unit to major resistance at 0.7310, a level that could come into the sights of traders if the NZD responds favourably to this morning’s New Zealand GDP print.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

The rebound in Chinese stock markets has extended and US bond yields are steady after the market digested the trade tariff news. MSCI Asia-Pacific index up 0.95%, whilst the Japanese Nikkei rises 1.3%
A reclassification of the S&P 500 will see tech behemoth such as Facebook and Alphabet move from 'information tech' stocks into 'communication services' along with about a fifth of the index.
Oil prices are seen to consolidate after rally.
Cryptocurrency markets are holding steady, and with higher lows being made across the board this could signal a trend reversal for many technical traders.
UK inflation data is in focus today, likely to be closely watched as investors economic optimism hits a near seven year low.
Asian overnight: Asian markets continue to defy expectations, with gains throughout the region flying in the face of an intensified trade breakdown between the US and China. In a retaliation to the US decision to implement tariffs on $200bn of Chinese imports, China has now responded with further duties on $60bn of US imports. Chinese authorities have however said that they would not intervene in the currency market and have not yet removed themselves from upcoming bilateral talks on trade with the US. Despite both sides announcing new tariffs yesterday, the level of those levies are somewhat lower than expected, sparking a relief rally.
In Japan the BoJ decided to maintain a steady monetary policy, with the bank stating that they will maintain extremely low rates for an extended period of time.
UK, US and Europe: Looking ahead, the European session will focus on the UK inflation data, with CPI expected to reverse last month’s gain, with a tick lower to 2.4%. A similar move is expected with core CPI, where a shift down to 1.8% would help continue the downward spiral of 2018. CPI, which stands for Consumer Price Index, is a key measure of inflation for the UK and is used by the Bank of England in making interest rate decisions. The report tracks changes in the price of a basket of goods and services that a typical British household might purchase. An increase in the index indicates that it takes more Sterling to purchase this same set of basic consumer items
The afternoon brings building permits and housing starts from the US, while an appearance from Mario Draghi and the crude inventories means that we should have a sufficient amount of data to shift the needle.
South Africa: The Jse Allshare index is expected to post gains this morning following its international counterparts. The rand is holding on to short term gains while commodity prices tick higher on the back of a weaker dollar. Tencent Holdings is trading 2% higher in Asia suggestive of a positive start major holding company Naspers. BHP Billiton is up 2.89% in Australia suggestive of a positive start for local resource counters.
Economic calendar - key events and forecast (times in BST)
9.30am – UK CPI (August): CPI to rise 2.7% YoY from 2.5%, and 0.3% MoM from 0%. Core CPI to be 2.1% YoY from 1.9%. Markets to watch: GBP crosses
1.30pm – US housing starts & building permits (August): permits to fall 0.8% MoM and starts to rise 0.3%. Markets to watch: US indices, USD crosses
3.30pm – US EIA crude inventories (w/e 14 September): stockpiles forecast to fall by 1.2 million barrels, from a 5.3 million barrels drop a week earlier. Markets to watch: WTI, Brent
Source: Daily FX Economic Calendar
Corporate News, Upgrades and Downgrades
Stagecoach said that it has made a good start to its financial year, with forecasts unchanged despite a mixed performance, as revenue weakened in North America but UK rail revenue rose.
Kingfisher said that underlying pre-tax profit fell 14.8% to £375 million for the first half, while first-half gross margin fell 40 basis points. The firm said it remained on track to hit strategic milestones
NEX will pay $50 million to settle claims in the US relating to interest rate benchmark manipulation.
BAT upgraded to hold at DZ Bank
CNP Assurances upgraded to hold at HSBC
Commerzbank upgraded to outperform at RBC
Concentric upgraded to buy at SEB Equities
Castellum downgraded to sell at DNB Markets
Coloplast downgraded to hold at ABG
Credit Agricole cut to neutral at Mediobanca
Fabege downgraded to sell at DNB Markets
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

It was a choppy day in markets as sentiment vacillated in response to the latest escalation in the US-China trade war. US President Trump made traders wait a little longer than was flagged for his administration's trade announcement, leaving it until well after Wall Street's close to drop the news. Upon the eventual release, initial reactions were unfavourable: though the $US200bn worth of tariffs would go ahead on September 24th at the rate of 10 per cent, this will be upped to 25% come the start of next year is China refuses to come to the negotiating table. Markets viewed the White House's position as much more hostile than expected and began to price in that an equally aggressive reaction from the Chinese would be forthcoming.
Relief rally: Perhaps to Chinese policy makers' credit, trader's worst fears didn't materialise. The gap in the latest chapter in the US-China trade war that has generated so much uncertainty is not what the White House may do, but what the Chinese may do in response. In short: will China's retaliation spark an out of control escalation in this trade war? Though it took until the close of the ASX200 to come, some measured responses from the PBOC and Chinese bureaucrats throughout the Asian session proved enough to convince traders that the situation is under control. Hence, by the time the Chinese announced they would retaliate in line with previous threats of $US60bn worth of tariffs on American goods overnight, traders (for now) judged they had enough information to be comfortable to jump back into the market.
ASX: So that's the state of play (broadly speaking) as we look toward the day ahead. SPI futures are indicating a jump at the open of about 28 points, on the back of a day that the ASX200 shed a touch shy of 0.40 per cent. A bounce is on the cards today for the local market, with energy, materials and health care stocks the ones to watch to drive the recovery. The prevailing sense of relief that looks to drive a synchronised run higher in Asian equities today begs some curious questions for the ASX: the index has found itself comfortable in a range between around 6130 and 6190 in recent weeks, following a bout of risk-off profit-taking when trade war fears set-in. If the trade war risks have diminished, can the ASX200 restart its run higher? A move back toward 6220 in the final days of the week may signal the affirmative.
China: The boost in risk appetite bodes well for hitherto embattled Asian equity indices today. Chinese stocks made a late run yesterday afternoon and appear likely to continue the charge in the day ahead. Investors have been reluctant to jump into China’s markets because of trade wars fears and concerns around the country’s fundamental growth, so it remains a matter of interest as to whether the last 24 hour’s developments will shift the dial on this view. Commodities prices – a strong proxy for traders’ attitude towards Chinese growth prospects – generally lifted overnight, boding well for Asian equities today. A change of trend in China’s markets will be hard earned but look for a hold above 3400 in the CSI300 in the days and weeks ahead to signal a change in tide.
US Session: Wall Street has provided a strong lead for the ASX200 to follow today, though it must be said Australian shares have decoupled somewhat from their US counterparts recently. The tech stocks led US shares higher, which had been sold-off rather aggressively in the last week or so because of fears that the Chinese may target tech-company’s supply chains. The NASDAQ was up 0.76 per cent for the day as a result, underpinning a lift in the S&P500 of around 0.54 per cent. Speaking of the benchmark S&P500, today’s activity puts that index back within reach of record highs: it came within a tight 5 points away from it overnight, so provided (at the very least) a neutral tone of trade in the day ahead, this milestone may be reached once more in the next US session.
Japan: The news flow for the Asian session today looks light, though of course it must be said we are only a Tweet away from that changing. The major event on the calendar will be the meeting of the Bank of Japan, which of course will keep their policy settings on hold. Lost in the back drop of trade war doom-and-gloom over the last week has been the remarkable rally in the Nikkei, which has managed to hold above resistance/support at 23,000. The rally has been spurred by a recent run of strong Japanese data, that has supported the contention that Japan’s economy is in a state of improvement. As such, the BOJ’s commentary out of its meeting today may be influential, as the Nikkei eyes a run to resistance at 23,500.
Oil: A story largely removed from matters relating the Asian region and the US-China trade war was developments in oil prices. The black stuff spiked during the European session overnight, after news was reported that Saudi officials had expressed that it would be comfortable with Brent Crude prices over $US80 per barrel. A perfectly rational response from a country which stands to benefit from higher oil prices, the statement planted the idea in the minds of commodity traders that if global supply and production concerns persist in oil markets, that the Saudi’s would be less likely to boost output in order put downward pressure on prices. The $US80 mark will remain a considerable level of resistance for Brent Crude even considering this story and ahead of US Crude Oil inventories data tonight, but perhaps a breach of this zone could turn that price into somewhat of a pivot point, with the next resistance level from there around $83.75.
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